New York Law Review

Tag: Decedent Estate Law

  • Matter of Rosenzweig, 19 N.Y.2d 92 (1967): Satisfaction of Elective Share When Spouse Renounces Will Benefits

    Matter of Rosenzweig, 19 N.Y.2d 92 (1967)

    When a surviving spouse exercises an absolute right of election to take against a will, renouncing benefits conferred by the will, the elective share is satisfied by prorata contributions from all beneficiaries, not first from the renounced bequest.

    Summary

    This case addresses how to satisfy a widow’s elective share when she renounces a bequest in a will and elects to take her intestate share outright. The will created a trust for the widow, terminable upon remarriage, which gave her the right to elect against the will. The court held that because the widow exercised her absolute right of election, her share should be satisfied by prorata contributions from all beneficiaries, including a brother who was to receive the widow’s trust income if she remarried or died. The Court of Appeals reasoned that the widow’s renunciation divested her of any interest in the trust, and therefore the general rule of first applying the bequest to satisfy the elective share did not apply.

    Facts

    Samuel Rosenzweig’s will bequeathed personal effects to his widow, Aranka, $10,000 to his brother, Emanuel, and the balance to a residuary trust for his daughter, Erica. The trust income was to be distributed: 15% (but not less than $300/month) to Aranka, terminable upon remarriage or death, with Emanuel to succeed to that interest; and 70% (but not less than $300/month) to Erica. The will allowed invasion of the principal if the income was insufficient. Aranka was named executrix and cotrustee.

    Procedural History

    Aranka elected to take against the will because the trust benefit was not “for life.” She petitioned for construction of the will to determine the disposition of the income intended for her. The Surrogate held that Emanuel should succeed to Aranka’s interest and the Appellate Division affirmed. Later, in an accounting proceeding, the Surrogate held Aranka’s elective share should be satisfied by prorata apportionment between Emanuel’s legacy and the residuary trust. The Appellate Division reversed, holding Aranka’s interest under the will should first be applied to satisfy her elective share. Emanuel appealed to the Court of Appeals.

    Issue(s)

    1. Whether, when a surviving spouse exercises an absolute right of election and renounces a bequest under the will, the elective share is satisfied first from the renounced bequest or by prorata contributions from all beneficiaries.

    Holding

    1. Yes, the elective share should be satisfied by prorata contributions from all beneficiaries because when the right of election is absolute, the spouse loses any benefits of the will and all legatees contribute ratably to her share.

    Court’s Reasoning

    The Court of Appeals reversed the Appellate Division, reasoning that the prior construction proceeding conclusively determined that the testator intended for Emanuel to succeed to Aranka’s interest if she exercised her right of election. Therefore, Aranka was divested of any interest in the trust, and her intestate share should be satisfied by prorata contributions from each of the legacies.

    The court distinguished between an absolute right of election (where the spouse receives nothing or an illusory trust) and a limited right of election (where the spouse receives a benefit less than the intestate share). In the former case, the elective share is satisfied prorata; in the latter, the bequest is first applied, with the difference made up prorata. The court noted the will’s terms should, as far as possible, remain effective. Since the trust was not for Aranka’s life, evaluating her interest as if it were a life estate was illogical. The court quoted the Third Report of the Temporary State Commission on Modernization, Revision and Simplification of Law of Estates, stating that the rule should be that where the right of election is absolute, the spouse loses any benefits of the will and all legatees contribute ratably to her share.

    The court further explained, “if the trust benefits had been conferred upon the spouse, subject to termination only by her death, and a right of election arose by virtue of the fact that the capital value of the trust was not equal to what would have been her intestate share, each legatee would have been required to contribute pro rata to make up the difference between the capital value of the corpus and the intestate share. The remainder of her elective right would then have been satisfied by the life benefits given her under the terms of the trust (Decedent Estate Law, § 18, subd. [f]).”

  • Matter of Bailis, 16 N.Y.2d 74 (1965): Accrued Income and Widow’s Right of Election

    Matter of Bailis, 16 N.Y.2d 74 (1965)

    A stipulation against the apportionment of accrued income in a trust does not automatically deprive a widow of her right to elect against a will under Section 18 of the Decedent Estate Law.

    Summary

    This case addresses whether a clause prohibiting the apportionment of accrued income in a trust established for a widow’s benefit disqualifies the trust from satisfying the requirements of Section 18 of the Decedent Estate Law, thus granting her the right to elect against the will. The Court of Appeals held that such a stipulation, by itself, does not deprive the widow of the income benefit, and therefore, does not automatically give rise to a right of election. Additionally, the Court addressed the issue of counsel fees, determining that they should not be awarded out of the estate in this instance.

    Facts

    The testator established a trust for his widow’s life benefit in his will. The trust contained a provision stipulating against the apportionment of accrued income, meaning income earned by the trust corpus but not yet payable to the trustee at a specific time (presumably, the widow’s death) would not be apportioned. The widow sought to elect against the will, arguing the trust did not provide her with the minimum benefit required under Section 18 of the Decedent Estate Law due to the accrued income clause.

    Procedural History

    The case originated in the Surrogate’s Court, Queens County. The Surrogate’s Court’s initial order was appealed. The Appellate Division’s order was then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a stipulation against the apportionment of accrued income in a trust for life automatically deprives the widow of the benefit of the income from the trust under Section 18 of the Decedent Estate Law, thus granting her a right of election?

    2. Whether counsel fees should be awarded out of the estate in this proceeding?

    Holding

    1. No, because a stipulation against the apportionment of accrued income, in and of itself, does not deprive the widow of the benefit of the income from a trust for life under Section 18 of the Decedent Estate Law.

    2. No, because counsel fees should not be awarded out of the estate in this instance.

    Court’s Reasoning

    The Court of Appeals relied on Matter of Byrnes, 260 N.Y. 465 (1932) and legislative history to support its holding. The Court reasoned that the mere presence of a clause prohibiting apportionment of accrued income does not automatically render the trust insufficient to satisfy Section 18. The focus remains on whether the trust, as a whole, provides the widow with the intended benefits. The court emphasized that the intent of Section 18 was to protect widows, but not to allow them to invalidate testamentary plans based on technicalities if the overall benefit was adequate. Regarding counsel fees, the court cited Surrogate’s Court Act § 278 and Matter of Liberman, 6 N.Y.2d 525 (1959), indicating that awarding counsel fees out of the estate was inappropriate in this particular case.

    The court directly stated its holding: “We hold that a stipulation against the apportionment of accrued income, i.e., income earned by the corpus, but not yet payable to the trustee, does not, in and of itself, deprive the widow of the benefit of the income from a trust for life under section 18 of the Decedent Estate Law.”

  • Wechsler v. Bowman, 285 N.Y. 284 (1935): Disregarding the Corporate Fiction to Revive an Ancient Debt

    Wechsler v. Bowman, 285 N.Y. 284 (1935)

    Courts will not disregard the corporate entity of a family-owned corporation to revive a time-barred debt against the shareholders, absent evidence of fraud or wrongdoing.

    Summary

    This case addresses whether payments made by a corporation formed by the legatees of a deceased mortgagor constitute payments by the legatees themselves, thus preventing the Statute of Limitations from barring a foreclosure action against them. The Court of Appeals held that the corporate entity should be respected, and payments made by the corporation, even though it was a family-owned entity, did not constitute payments by the individual legatees. Thus, the Statute of Limitations barred the action against the legatees.

    Facts

    Joseph Wechsler executed a bond and mortgage in 1894, due in 1895. He died in 1896, leaving his estate to his widow and children. After the widow’s death in 1906, the estate was distributed. In 1906, the Wechsler children formed a corporation, “The Joseph Wechsler Estate,” and transferred the mortgaged property to it in exchange for stock. The corporation, wholly owned and managed by the Wechsler children, made interest payments on the mortgage until April 1, 1928. A foreclosure action was commenced in February 1930, more than 20 years after the last payment by Wechsler’s executors.

    Procedural History

    The trial court (Special Term) ruled in favor of the defendants, finding that the statute of limitations barred the action. The Appellate Division reversed, holding that the payments made by the corporation constituted payments by the legatees, thus tolling the statute. The case then went to the New York Court of Appeals.

    Issue(s)

    Whether payments made by a corporation wholly owned and controlled by the legatees of a deceased mortgagor constitute payments by the legatees themselves for the purpose of the Statute of Limitations on a debt of the mortgagor.

    Holding

    No, because the corporation is a separate legal entity, and its actions are not automatically attributable to its shareholders, even in a family-owned corporation, absent evidence of fraud or wrongdoing to justify piercing the corporate veil.

    Court’s Reasoning

    The court emphasized the importance of respecting the corporate entity. It acknowledged that courts will disregard the corporate fiction in cases of fraud, evasion of obligations, or other wrongdoing. However, in this case, there was no evidence of such misconduct. The corporation was legitimately formed to limit personal liability, a purpose the law allows. The court stated, “It leads nowhere to call a corporation a fiction. If it is a fiction it is a fiction created by law with intent that it should be acted on as if true. The corporation is a person and its ownership is a nonconductor that makes it impossible to attribute an interest in its property to its members.” The court reasoned that allowing the Statute of Limitations to be circumvented merely because the corporation was family-owned would undermine the purpose of incorporating and create uncertainty for those relying on the protection of the corporate form. The court explicitly rejected the argument that they could consider the corporation as merely an agent of the legatees. To revive an old debt by “piercing the armor of corporate entity” without a showing of actual wrongdoing would be improper.